Wayfair Inc (NYSE:W) got punished last Thursday. Wayfair stock tumbled 23% following a downbeat earnings report. The stock had been closing in on the $100 level, but after Thursday’s 21-point decline, Wayfair finds itself back in the mid-$70s. Unfortunately for Wayfair shareholders, this may just be the beginning of the stock’s slide.

Let’s get one thing out of the way. Wayfair’s growth story is still intact. The company beat again on revenues this quarter. It’s $1.4 billion in revenues topped expectations by $80 million. That revenue figure also amounted to a 44% year-over-year growth rate.

But the company has historically failed to convert sales into income. And that’s only going to get tougher for several reasons.

Wal-Mart Is Coming

As bad as the earnings report was for Wayfair stock, it wasn’t the only terrible news of the day for the company. On top of that, Walmart Inc (NYSE:WMT) announced that it is rolling out a large new site focusing on home furnishings and decor.

Techcrunch reported Walmart’s move as follows:

“The retailer is now launching a redesigned Home shopping experience on the web which will better highlight home products, like furniture, accessories, and other decorative items. The new site’s home page will feature curated collections across nine style categories, including modern, mid-century, traditional, glam, industrial, bohemian, farmhouse, transitional and Scandinavian. Unlike Walmart’s typical shopping experience, it will also use editorial-style imagery and will include design tips written by in-house staff.”

This is clearly problematic since Walmart is turning into an increasingly effective online competitor. It’s already #2 in the U.S. in online sales, only trailing Amazon.com, Inc. (NASDAQ:AMZN). Its purchase of Jet.com looks better and better with time.

And on top of that, Walmart has invested in and partnered with leading international shopping sites, including China’s booming JD.Com Inc (ADR) (NASDAQ:JD).

And So Is Plenty More Competition

Walmart’s announcement should be enough to send shivers down the spine of Wayfair’s management team. And it’s not like online furniture sales was a low-competition area previously.

Overstock.com Inc (NASDAQ:OSTK) has a solid internet furniture business. Yes, OSTK stock is a blockchain play at the moment, but Wayfair faces a real threat from Overstock’s legacy operation.

There has also been chatter that Amazon.com is coming for furniture. As short seller Citron Research reminded us, when Amazon entered the grocery industry with its Whole Foods purchase, grocery stores stocks such as Kroger Co (NYSE:KR) got obliterated.

The same happened in pharmacy when Amazon started making its plans clear in that sector. What’s the moat that would keep Amazon out of furniture?

At this point, analysts covering Wayfair still seem unconcerned about the Amazon threat. When Piper upgraded W stock this past summer, for example, it didn’t mention the word “Amazon” once. As Citron quipped, “Analyzing an e-commerce company without acknowledging Amazon is like writing about the 2017 NBA season and refusing to mention the Golden State Warriors.”

Wayfair Still Is an Unprofitable Business

While Wayfair beat on revenues, it missed pretty aggressively on EPS. The company lost 58 cents in Q4, well beyond analysts’ expectations of a 52-cent loss for the period. It’s worth remembering that Wayfair is an upscale goods retailer. This sort of business is supposed to do great around the holidays. Needless to say, if Wayfair can’t make money in Q4, what about the rest of the year?

Analysts remain upbeat on Wayfair’s future. Despite Wayfair’s losses more than doubling since 2015, analysts were projecting that its net loss for 2018 would shrink by half. It appears even that guess will have to be lowered to something more pessimistic.

This should come as no surprise. The company has never turned a profit. In fact, as it scales its revenue up, it tends to lose more and more money.

Citron has called the company a broken one with a “terminal business model.” As the old joke goes, a business that loses money on every sale can try to make it up on volume. But it doesn’t work in real life. There is no clear indication that Wayfair can ever turn a profit using its current strategy. And if it tried raising prices, shoppers would probably defect to other online stores.

Wayfair Is Not the Amazon of Furniture

It’s tempting to look at Wayfair as a modern-day Amazon. Sure, the company intentionally loses money now, Wayfair stock bulls say, but it’s by design. Build out your brand, take market share, and raise prices later. However, Wayfair can’t realistically hope to achieve anything close to what Amazon has done.

For one thing, Wayfair is just operating in one niche, where Amazon can and is competing across the whole spectrum of retail. On top of that, there’s nothing stopping Amazon, Walmart and other all-in-one stores from beating Wayfair at its own game.

Both Amazon and Walmart are incredibly knowledgeable about both internet sites and supply chain management/cost control. In the long run, what, if anything, is Wayfair’s sustainable edge against much larger retail competition? For what it’s worth, Wayfair hasn’t even managed to kick Overstock out of its niche effectively.

Bottom Line on Wayfair Stock

Now if Wayfair stock were valued at a much lower price, maybe it’d be worth a gamble. There’s a good chance that the company never turns profitable, and shares collapse. But if revenues keep going up 40%/year for awhile, Wayfair could have value to a future acquirer.

However, the market still values Wayfair at more than $6 billion, even after Thursday’s plunge. That’s simply way too much for a company that hasn’t proven its business model.

Given the recent run-up in Wayfair stock, the earnings plunge only takes the stock back to levels seen last quarter. For most investors, Thursday’s decline should be a warning sign that it’s time to reflect and consider taking profits before they slip away.

At the time of this writing, the author owned JD stock and had no positions in any of the other aforementioned securities. You can reach him on Twitter at @irbezek.